SAP co-CEOs talk company direction, building trust

In their first appearance since the leadership shakeups at SAP AG, new co-CEOs Jim Hagemann Snabe and Bill McDermott defended the dual CEO structure and stressed no drastic change except for an accelerated continuation of what the company is already doing.

Despite the leadership switch at the Germany-based software company in February, the only “major change is one of speed” to act and to deliver offerings to market and value to customers, said Hagemann Snabe.

Both CEO’s primary responsibilities remain the same, and neither expects that the new management signifies a slew of dramatic changes at SAP, said Hagemann Snabe. “Don’t think that just because we are in this new role that suddenly by a magic stick the world has changed,” he said.

Last month, SAP announced the resignation of CEO Leo Apotheker followed a week later by that of executive board member John Schwarz. Also, chief technology officer Vishal Sikka was appointed to the executive board.

As for the co-CEO structure upon which SAP has historically relied, both Hagemann Snabe and McDermott stressed their complementary skills, high level of trust, and hands-on approach with employees and customers that will allow them to do more and respond faster than they would with a single CEO model.

McDermott said both men share the same long-term vision and “to have two minds thinking about that 24-by-7 can’t possibly be bad.” He added that the level of communication between the two of them is great: “We speak daily, Saturdays and Sundays, too.”

Hagemann Snabe and McDermott said they are “having fun” with this new structure, but avoided discussing whether that implies things weren’t fun with Apotheker.

On the issue of trust, Hagemann Snabe said the company is putting employees’ ideas, passions and innovations first. “Trust is hard to build and easy to break … we are very confident we can build necessary ambition and mood within the company,” he said.

SAP will continue to expand the volume of business and the customer engagement model, increase margins and maintain tighter cost controls while making SAP an lean organization, said McDermott.

SAP’s aspiration is to return to “a double-digit-growth company again” as global markets begin to improve, said McDermott. “We will get there when the macro-economic climate around the world allows that, whether that’s 2011 or 2012 remains to be seen,” he said.

The company also experimented in 2009 with a new iterative development style where small teams behave like small business entrepreneurs. That led to more efficiency, happier engineers and products that were more relevant to the customer, said Hagemann Snabe. While the model is currently used across only 20 per cent of the organization, he expects to see that spread throughout.

SAP will continue to target high-growth markets like Turkey, the Middle East and Africa, as well as core markets like Germany, U.K. and U.S. Asia remains the fastest-growing market for the company and it will continue its focus there.

Despite what has been a slow uptake of SAP’s on-demand enterprise software Business ByDesign, McDermott said the product has the potential to create a major market opportunity for the company. “I know we have a very strategic product here,” he said.

George Goodall, senior research analyst with London, Ont.-based Info-Tech Research Group Ltd., told ComputerWorld Canada it’s no surprise that SAP has noted speed of product delivery and value to customers as the major strategic change that comes with this new leadership, but the truth is there are other things going on.

Goodall pointed out, for instance, the complications of the on-demand delivery model with Business ByDesign and the maintenance price hike is likely why Apotheker took the fall. “When you get on the on-demand delivery model, the business model is very different. It’s very easy to get under water,” said Goodall.

When it comes to SAP’s leadership structure, Goodall finds the company rather “odd” with its limited-term contracts, co-CEOs and endless drama regarding who is next being groomed for succession. But while the co-CEO structure has worked well for SAP in the past, Goodall said that’s not really the real focus of concern. “What becomes important is not what’s going on at the CEO level,” said Goodall. “It’s what’s happening on the business unit level with Business ByDesign, or on the geography perspective.”

Hagemann Snabe did acknowledge the difference between on-demand and upfront licensing models and the work required by SAP in that area. “It’s a very different business model we need to learn and add to the current on-premise business model,” he said.

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